Student Loan Repayment Far Worse Than Believed

January 19, 2017

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Revised Education Department
numbers shows at more than 1,000 schools, at least half of students defaulted
or failed to pay down debt within 7 years.

Last Friday, the Education
Department released a memo saying that it had overstated student loan repayment
rates at most colleges and trade schools and provided updated numbers. Many
more students have defaulted on or failed to pay back their college loans than
the U.S. government previously believed.

Analysis of the data revealed
that the Department previously had inflated the repayment rates for 99.8% of
all colleges and trade schools in the country.

The new analysis shows that at
more than 1,000 colleges and trade schools, or about a quarter of the total, at
least half the students had defaulted or failed to pay down at least $1 on
their debt within seven years.

The changes could have
implications for federal policy. Some lawmakers have endorsed the idea of
punishing colleges if enough students aren’t paying back the loans.

A spokeswoman for the Education
Department said that the problem resulted from a technical programming error.

This isn’t the first time data
problems have affected the Education Department. A recent government report
criticized how the department tracks information including the budgetary
implications of student loan forgiveness.

“This is a quality control issue
with a Department of Education that has been facing criticism already for other
data issues,” Robert Kelchen, an assistant professor of higher education at
Seton Hall University. The department
“needs to be regularly audited so these issues can be discovered sooner.”

The student loan repayment rates
were originally released in 2015 as part of the Obama administration’s College
Scorecard, which followed an aborted attempt to rate colleges and tie federal
funds to those ratings.

At the time, the Wall Street Journal
reported that at 347 colleges and vocational schools, more than half of students
had defaulted or failed to pay down their debt within seven years. Those
figures were based on students were supposed to start repaying loans in 2006
and 2007.

In September, the Department
released data tracking students who should have begun repayment in 2007 and
2008, and that number rose to 477. But with the updated number released last
week, that number grew to 1,029.

No college saw its repayment rate
improve under the revision, and some schools saw their seven-year repayment
rates fall by as much as 29 percentage points.